Trump cuts won't flow to US Farm Bill

Despite bipartisan support for reduced spending on farm programs in the wake of President Trump's tax cuts, Republican and Democrat agricultural committee members are expected to block cuts. AP Photo/Evan Vucci.

Donald Trump’s isolationist policies has free trade advocates despairing and Australian politicians imploring him to rethink his withdrawal from major international negotiations, particularly in the Asia-Pacific region.

But the disruptive powers the President has put on show on the world are limited by checks and balances on the domestic front, and partisan politics makes this particularly true for the Farm Bill that controls federal spending on agricultural subsidies.

Montana State University professor of economics and visiting director at free enterprise think tank the American Enterprise Institute Vince Smith said in modern politics “successive administrations have had little to say” on the Farm Bill.

“Take the crop insurance subsidies for example. Successive administrations in Obama, Bush, Clinton and even Trump all advocated for reductions, but between them the House and Senate agriculture committees write the bill and have happily ignored their recommendations,” Mr Smith said.

“The last administration that had an impact was Regan, but he advocated for an increase.”

Mr Smith, who spoke at the Australasian Agricultural and Resource Economics Society’s conference in Adelaide last week, was in Washington two weeks ago taking the temperature of lawmakers for this think tank before the current Farm Bill expires on September 30.

Around the same time, Australia was lobbying Mr Trump to back away from his protectionist policies, but Malcolm Turnbull conceded he did not expect the US to join the TPP “anytime soon”.

“We're certainly not counting on it. It would be great if they did, it is a real engine for jobs, for investment.”

He expects current provisions to remain in place until at least next year, as the committees defer a rewrite of the Bill and allow an automatic extension of the status quo - a situation which has already persisted for two years.

But lawmakers were “slowing realising they’ll have less, not more to spend this time”, as the implications of Mr Trump’s hefty tax cuts sinks in.

Mr Smith said the agricultural committees stood between factions in both parties who favour cuts to farm programs.

“There are Rupublican deficit hawks who are desperately seeking agricultural spending cuts, and Democrats who want to protect non-farm spending on childrens’ health and nutirtion programs and so on.”

However, he said the agricultural committees were comprised of Senators and Congressmen and women who from farming states who would shiled the Farm Bill as much as possible.

“We’re talking about a potential cut in the order of five to 10 per cent, not on the overall Farm Bill and the crop insurance program, but in a couple of others called shallow loss programs that were introduced in 2014,” Mr Smith said.

“Those programs involve $8 billion spending a year and it’s quite conceivable they’ll be pulled back to $5b. That would represent a historically significant cut, but it falls short of a major structural shift in farm spending.”

In Mr Smith’s opinion, crop insurance is one area ripe for reform.

“Crop insurance wastes quite a lot of resources,” he said.

“The program is structured so 70pc of all the subsidies flows to the largest 10pc of farm businesses, which are generally financially successful operations with little likelihood of long term financial problems.”